Home prices are soaring, but low inventory continues to hamper home sales.
The pace of homes under contract fell 10.6 percent in February, marking the sixth straight monthly decline, according to the National Association of Realtors’ monthly index. February’s pending home sales were down 0.5 percent compared to a year ago, marking the first time in eight months that they fell year-over-year.
NAR’s index is seen as a leading indicator of existing home sales, and a major drop is typically seen as a drop in demand from homebuyers. But Lawrence Yun, NAR’s chief economist, attributed the index’s declines in February and January to the record low levels of housing on the market.
“The demand for a home purchase is widespread, multiple offers are prevalent, and days-on-market are swift, but contracts are not clicking due to record low inventory,” he said in a statement.
Yun said tight inventory was inhibiting activity predominantly among lower-priced homes, while higher-end properties — those priced above $1 million — continued to go into contract.
At the end of February, NAR reported that there were just over 1 million units on the market, a record low that was virtually unchanged compared to January’s inventory. Based on February’s pace of sales, that amounts to two months’ worth of supply.
The trend was regional, too, with every area NAR tracks reporting month-over-month declines in February. But contract activity in the southern and western regions remained elevated compared to February 2020, while the northeast and midwest regions followed the national trend of year-over-year declines.